New referencing service launches where the tenant pays

A new tenancy referencing scheme has been launched in Scotland – where it is illegal for letting agents to charge fees – whereby tenants pay, and agents get referral fees.

The scheme, which also produces rent guarantees, has been launched by Let Alliance. The tenant pays £50 and the agent gets a £24 referral fee.

Boss Andy Halstead emphasised that the scheme is not a dodge to get round the ban on fees, but a solution that works within the new system.

However, asked if there was concern that the likes of Shelter might legally challenge the scheme, Halstead – who has taken his own extensive legal advice – did not rule this out.

He said, in answer to our question: “Quite possibly. But we are ready for them.”

Halstead’s legal advice says that the ban on fees was originally legislation drafted 15 years ago, before tenant referencing even existed as a concept, and was designed to stop landlords getting round rent control measures that now no longer exist.

However, the ban on fees was tightened up in the legislation and came into force last November 30, leaving agents wondering how to foot bills for services such as tenant referencing and inventories.

Some tenants producing their own references might, for example, go to Experian for a credit check, or indeed use the Let Alliance scheme: there is concern that tenants could, in law, ask for their money back, and could even launch legal action to reclaim their fee.

Notwithstanding this threat, Let Alliance has gone ahead with its launch. Crucially, agents are being advised that they cannot insist on prospective tenants using the new Let Alliance scheme. Instead, they are being advised that they can only give tenants the choice.

The new scheme aims to deliver to landlords comprehensive tenant referencing, a way for tenants to be accepted for homes without having to undergo the hassle themselves of sorting out their own referencing, and generate an income stream for agents. Agents also get rent guarantees for tenants who meet Let Alliance’s referencing criteria.

If prospective tenants do opt do use the scheme, the referencing reports will be delivered simultaneously to the agent and tenant, with the tenant being charged directly.

If they choose not to, then a new Let Alliance guide shows them what they will need to do to complete the process independently.

However, Halstead says that the referencing process is in practice onerous and Let Alliance’s experience throughout a four-month trial shows that most tenants would prefer to pay a fixed fee and buy an efficient service.

He said: “Self-referencing is very complex, difficult and time consuming. It is a nightmare for tenants that Let Alliance takes away.”

Halstead, founder and CEO at the business, said: “I am very close to the letting agent marketplace in Scotland and have many friends and associates whose businesses have had a tough time dealing with the legislation that stops agents charging tenants for services that they need.

“At Let Alliance we have made it our business to help in every way that we can. Our new proposition gives tenants valuable choice and support and an outstanding service whilst reducing the administration burden on agents’ businesses and allowing them to earn a valuable revenue stream from us. Everybody wins.”

The Scottish experience in the aftermath of the fees ban is being watched closely elsewhere in the UK. While a ban seems unlikely, the Office of Fair Trading wants to see fees set out in a clear tariff up-front, and the Advertising Standards Authority has ruled that fees must be clearly shown alongside the asking rent in all adverts for rental properties.